What started with the biggest collapse in oil prices since 1991 promises to be one of the wildest days of the years for world markets.
Panic sales, margin calls, lost liquidity, and homework deals against coronaviruses were just some of the challenges traders faced as risky assets plunged, currency volatility soared soaring and money was inundating government bonds. They also had to determine how an oil price war and an epidemic outbreak would spread to the global economy, businesses and geopolitics.
“The day was absolutely chaotic,” said Eugene Kang, whose team trades in assets, including Russian government bonds, at NH Investment & Securities Co. in Seoul. “The financial markets have been caught off guard.”
This is how the unrest unfolds at trading offices around the world.
Zhang Chenfeng, an oil trading analyst at the Chinese hedge fund Shanghai Youlin Investment Management Co., barely slept last night. He knew that Saudi Arabia’s decision to start a full-blown price war with Russia was going to hit the market, but the 30% drop more on Monday was another punch in the gut. “It was shocking,” said Zhang. “It was historic.”
It also quickly spread to other markets. The 10-year Treasury yield fell below 0.5% for the first time. Oil-sensitive currencies plunged, the Mexican peso weakening by 6%. Futures on the S&P 500 fell about 5% – triggering trading restrictions – and European stocks seemed ready to follow Japan in a bear market.
Hypnotized by the sale
Some floors were strangely silent. “It’s almost as if everyone is hypnotized together and the levels are just going south without anyone being able to stop the slide,” said Tsutomu Soma, a bond trader at Monex Inc. in Tokyo, who is on the market long enough to live on Black Monday. crash in 1987. “It’s been a while since I’ve seen this kind of sale,” he said. “But I don’t see the kind of shouting through the trading room or the people throwing their towels like in the past. It may be a difference in the generations around me now.”
For one of these millennia, Rishi Mishra, research analyst at Futures First, 29, the madness of the market has given way to hysteria. “For me, personally, it’s just funny now! The kind of price that traded today, no one could make sense of.”
“These movements are quite amazing,” said Takeo Kamai, chief execution officer at CLSA Securities Japan. “We see type movements once in a career and I think many professionals are impressed. Only a handful could have imagined this type of scenario for world markets in 2020. ”
As the turbulence spread to currencies, some traders struggled to keep up with the rapid market swings that had just seen volatility plunge to record lows. The Australian and New Zealand dollars fell rapidly before recovering some of the losses. The yen jumped 3.6% and the Norwegian krone slipped 4.7%.
“When you see a 4% move in just a few minutes, it’s pretty safe to take the other side of the court – but this time it was just too short a window,” said Stuart Simmons, a senior portfolio manager in Brisbane, Australia, at QIC Ltd., which oversees $ 83 billion ($ 54 billion) in assets. “When they start to trigger stop losses, currencies end up cascading on themselves. Price action becomes dysfunctional. “
Margin calls may have added to the volatility, said Margaret Yang, strategist at CMC Markets Singapore Pte. “We saw more margin calls and more funding this morning,” she said. But some customers were also preparing to take larger positions, Yang added, a sign that at least some saw Monday’s turmoil as an opportunity.
Coping with panic
With fear in the air, the only topic of discussion at GAM Investment Management is how much worse it can get, said Paul McNamara, who oversees more than $ 7 billion in fixed income assets in developing markets.
In Taipei, where the normally moderate Taiex index plunged more than 3% and closed at its lowest level of the day, two fund managers have taken radically different approaches to rout. Sean Lee of the Shin Kong Investment Trust has accelerated asset adjustments, saying he needs to act quickly because “it’s hard to say what’s going to happen next.”
In contrast, Hiroki Lu of SinoPac Securities Investment Trust plans to wait before making big strides.
“I just checked the performance of the market when it opened and moved on. There’s no point in watching the markets in a situation like this – it’s too volatile and investors are too panicked, “said Lu.” This is not the first time the market has been so panicked, so I I’m cool about it. My customers haven’t asked me questions either. “
Work at home
Mandatory home work agreements imposed by financial companies to contain the risks of the coronavirus epidemic added another layer of uncertainty.
“When you work at home without colleagues, you feel more nervous because you are alone,” said Shane Oliver, chief investment officer and chief economist at AMP Capital Investors.
Kirby Wang, general manager of Beijing Haihuiyuan Investment Co., has been working from his home office for more than four weeks. He has to balance his time spent investing with teaching Chinese poetry to his young children after their school has moved all the classes online. The market brings back uncomfortable memories of 2008, when he worked at Lazard Asset Management in New York. “I certainly hope it will not be as bad as it was in 2008, but it is not out of the question,” he said.
Luke Hickmore, fund manager at Aberdeen Standard Investments, finds that having a dog helps him cope with falling Treasury yields.
“It’s much quieter with a labrador,” he said. “I tried to explain to her – she licked my cheek, just a reaction.”
For some investors, the return of market volatility could not have happened sooner. Chris McGuire, whose Phalanx Japan AustralAsiaMulti-Strategy Fund is intended to take advantage of widening price fluctuations, gained nearly 10% this year until March 6, after three difficult years that saw assets under management of his business fell to $ 22 million, from about $ 160. million.
McGuire, based in Chicago, whose fund has continued to multiply by 13 since April 2005, said that his bets on Japanese convertible bonds had “finally” started to bear fruit again. “Covid-19, at least for now, provides the black swan event that the markets have never realized,” he said.
Ali El Adou, asset manager at Daman Investments in Dubai, said he had rushed to the office much earlier than usual on Monday so that he could invest quickly if necessary: ”Although the markets are collapsing and volatility is increasing, we are closely monitoring potential investment opportunities. “
(Updates prices and adds comments throughout.)
To contact Bloomberg News staff for this story: Joanna Ossinger in Singapore at [email protected]; Ishika Mookerjee in Singapore at [email protected]; Alfred Cang in Singapore at [email protected]; Heesu Lee in Seoul at hlee425 @ bloomberg .net; Tomoko Yamazaki in Singapore at [email protected]; Cindy Wang in Taipei at [email protected]; Ruth Carson in Singapore at [email protected]; Gregor Stuart Hunter in Hong Kong at [email protected]; Bei Hu in Hong Kong at [email protected]; Lucille Liu in Beijing at [email protected]; William Shaw in London at [email protected]; Anooja Debnath in London at [email protected]; Filipe Pacheco in Dubai at fpacheco4 @ bloomberg.net; Kiuyan Wong in Hong Kong at [email protected]
To contact the editors responsible for this story: Christopher Anstey at [email protected], Michael Patterson, Neil Chatterjee
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